Policy Exchange, a Tory-friendly thinktank, has had David Cameron hissing at it to keep quiet about its new report on urban regeneration. Cities Unlimited states bluntly that schemes to revive northern towns whose economies have suffered from the decline of shipping and manufacturing have not worked, and that people living in cities such as Sunderland and Hull should instead be encouraged to move to the south-east, where there are more jobs.

It makes its claims with humour, even apologetically: hardnosed economic liberalism dressed as compassionate "realism". But if you'd never been to Liverpool before reading this report you would think the place was dying on its feet. It's not: it's a living city that has survived - and is now thriving - under the threat of "managed decline" from the centre for 30 years.

Everything in the report is viewed through the prism of pay, which I accept is easy to get sniffy about if you have enough money to live on. It's right to say that no one should suffer throughout their lives due to being born in one place rather than another. But it suggests that children growing up in poor towns in the north will suffer in terms of life experience because they are from the north, not because of poverty.

Encouraging people to move south because the north has lots of poor people is like saying that the East End of London should be vacated because it's not as rich as the rest of the city. London may be an "economic powerhouse", to use co-author Tim Leunig's words, but it also contains dozens of council wards as poor as those in Liverpool. Unemployment across London is higher than the national average. The government's preoccupation with making London the world's financial burg means that quality of life in the city is compromised even if you earn a good wage.

Liverpool's main problem, as I see it, is not its geographical position but that it is too large for its population, a situation created by the hungry heads of surrounding local authorities in the 60s and 70s. Now it sprawls for miles, and people who live in the outskirts face a long journey to work. What it desperately needs is a tram or light rail system to shrink the city. Indeed, public transport must be improved throughout northern England if it is to thrive economically. It's no good saying the north can't compete with the south when it hasn't the infrastructure to match it. A system of bus and train services as frequent and cost-effective as those in London would unite the region, aggregate its strength against that of the south-east, and allow the benefits of growth to be spread more evenly.

As someone who moved from the Midlands to London to pursue a vocation, and from London to the north-west to pursue lower blood pressure, I'm an advocate for internal migration. But there has to be a reason for it greater than pure economic necessity. Otherwise the risk of feeling dislocated and alienated outweighs the higher pay.

Of course it's better to be employed than to be unemployed; but to say that enough work has been done by government and markets to create the conditions for good jobs north of the Wash is simply mischievous, as is the idea that building three million homes - like the Field of Dreams - in Oxford, Cambridge and London will create three million jobs.

In any event, the south-east would choke on itself - more than it is already - if these proposals were enacted. Rather than luring people into an "economic powerhouse" that cares nothing for the richness of life itself, we should focus on increasing what the Bhutanese government calls "gross national happiness". That won't be achieved by sending Scousers to live in the Thames Gateway.